Re-Engineering The Corporation

Book Review:
Re-engineering the Corporation: A Manifesto for Business Revolution

You’ve likely heard the phrase “Re-engineering a business”. What does it really mean? What are the benefits? What further advancements does it lead to?

Since its original 1993 publication, Re-engineering the Corporation: A Manifesto for Business Revolution by Michael Hammer and James Champy has been recognized as one of the first books that inspired businesses, both large and small, to take a critical look at themselves – to examine how they currently do their work and why they do it that way. And most importantly, to use the results of that analysis to radically redesign their business – to re-engineer it for a “quantum leap forward” in manufacturing efficiency, product quality, and customer satisfaction.

Why is Re-engineering Needed?
Hammer and Champy identify and describe the inherent and insidious shortfalls of doing business the way it’s always been done. After World War II, enormous economic expansion world-wide created a high demand for goods and services that continues to this day. However, product life cycles are typically only months now instead of years, and therefore managing business processes has become much more difficult. Yet the majority of corporations continue to use concepts little changed from those dating as far back as the Industrial Revolution – the hierarchal structure of top managers, middle managers, supervisors, and workers. Unfortunately, today’s workers and managers find themselves locked-in to this antiquated theory of organizing their work. Those methods – the division of labor, the need for elaborate controls, managerial hierarchy – causes inefficient complexity and uneconomical “fragmentation” of work.

But no corporation can survive in today’s ultra-competitive environment by persisting with these old management methods, whereby every internal process requires multiple steps by different people in various departments. Having so many separate departments inexorably causes lower quality and more errors. Instead, a complete and sweeping redesign is called for. Reengineering delivers those changes.

What is Re-engineering?
According to Hammer and Champy, “Re-engineering is defined as the fundamental rethink and radical redesign of business processes to generate dramatic improvements in critical performance measures, such as cost, quality, service and speed”. Note that re-engineering is centered on business processes – not tasks or job titles. Specifically, processes, not organizations, are the target of re-engineering, meaning that Hammer and Champy do not direct companies to transform their sales or manufacturing departments – instead, corporations are instructed to re-engineer the work these departments perform, with the overwhelming goal to ensure that each process generates added value to the company and customers.

Hammer and Champy promote a totally “clean sheet of paper” approach to re-engineering. This differs profoundly from other concepts such as Total Quality Management (TQM) since TQM is basically confined to modifying existing processes via incremental improvements. Conversely, re-engineering discards existing processes entirely, replacing them with totally new “leap forward” processes. Admittedly, this makes re-engineering sound a bit scary, and it is a lot of work, but the benefits are enormous.

Benefits of Re-engineering
All re-engineered corporations enjoy the following common results, which Hammer and Champy ably confirm through many real-world case studies:

Business processes
• Successful re-engineering produces dramatic, quantum leaps in performance, as opposed to small changes.

• Fragmented processes are merged, diminishing internal bureaucracy. Business processes are simplified rather than being made more complex. Organizational boundaries are removed.

• Jobs change from simple tasks to multi-dimensional work. Workers perform a broader range of tasks.

• Several jobs are combined into one. Formerly distinct jobs are integrated and compressed. Processes are integrated, increasing speed and diminishing errors.

• A re-engineered corporation sees extraordinary improvements in many performance indicators, such as response to customers, overhead costs, manufacturing efficiency, and excess inventory reduction.

• The entire corporation becomes tuned to the end-to-end process instead of flow-impeding departments.

Workforce / Teams
• A key change is made from inefficient corporate departments to process teams. Process teams are workers collectively responsible for results instead of individuals responsible for tasks. Work becomes more satisfying and challenging. A transformation occurs from simple tasks for simple people, to complex jobs for smart people.

• Checks, controls, and decision making become part of the process itself (through defined process-specific teams), as opposed to time-wasting interdepartmental hand-offs.

• Workers become empowered and have the authority to make decisions, eliminating hierarchy. Decision making becomes part of the work. Workers perform the work managers formerly did.

• More work gets done by fewer people.

• Employee/Team evaluation can now be based on profitability (measurable results) as opposed to simple “activity” (hours worked).

Use of Technology – Present and Future
• A re-engineered business inherently begins to better exploit the capabilities of technology, especially Information Technology (IT) to meet current goals, recognize and achieve new goals, and “hit a moving target”, i.e., where their business will be in the future. This allows the corporation to transform instead of respond, and even solve problems they don’t have yet.

How to implement Re-engineering

The basic steps are:

1. Start with what you know about your customers and work backward. Realize that your processes should always be considered customer-driven, and that processes exist only to create satisfied customers. [In this way, re-engineering lays the groundwork for the key concept of Customer Pull, whereby customer demand (i.e., the “pull”) defines your manufacturing].

2. Ask and answer tough questions about your corporation: why do we do what we do and why do we do it the current way?

3. Form a re-engineering unit, whose task is to drive the re-engineering effort. Hammer and Champy identify five key positions:
• The Leader.
• A Process Owner for each process to be re-engineered.
• A Re-engineering Team for each process. Each team should contain five to ten members, and should be a mix of insiders and outsiders. Outsiders often bring valuable perspective to processes in which they are not currently involved.
• The Steering Committee, whose tasks include setting re-engineering priorities, resolving conflicts, and monitoring the results.
• The Re-engineering Czar, who coordinates the various Re-engineering Teams.

4. Document your existing processes and measure them. Gathering this performance data shows where improvement is needed. For each process, determine what its ideal implementation would look like.

5. Re-engineer each process to get as close to the ideal as possible. A key part of re-engineering is the change from functional departments to process teams.

6. Move fast, accept the fact that there will be imperfections during the redesign, and don’t be afraid to take risks. Corporations who accept the challenge of re-engineering, and convince its workforce of the benefits will become their industry’s world leaders.

7. Re-evaluate each process on an ongoing basis.

8. Don’t stop as soon as you see the first signs of improvement. You can always do better!

9. Carry on to the next logical step . . . implement JCIT Demand Flow Technology (DFT).

Re-engineered processes deliver much greater flexibility in production planning and execution, allowing multiple tasks to be performed simultaneously. This is why re-engineering is the logical and natural precursor to implementing the concept of Flow, which prevents the inefficient bottlenecks of stopping and restarting any part of a process.

Re-engineering is applicable to corporations large and small – even start-ups can benefit. In fact, re-engineering re-invents your entire corporation, and helps you grow nimble to instantly react to changing conditions, create satisfied, loyal customers, and propel your corporation to the top of its industry. This essential flexibility can be perfected by implementing Demand Flow Technology (DFT) from the John Costanza Institute of Technology.

All that is needed, is the will to succeed and the courage to begin!


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